Clarkson v Future Resources FZE & Ors

Where parties have settled litigation by a Tomlin order, a claimant who has released claims arising from the original dispute and agreed not to sue may be precluded from challenging settlement terms as unlawful penalties, particularly where the challenge depends on an interest expressly relinquished by the settlement. The court may determine an arguable penalty challenge within an enforcement application; separate proceedings and an adjournment are not necessarily required. Even if particular settlement provisions are arguably penal, that does not prevent secured lenders enforcing an independent contractual obligation to remove unilateral notices needed to realise their security. Costs ordinarily follow the event, but indemnity costs require conduct outside the norm, and a settlement indemnity for released claims may not extend to an enforcement application.

The claimant had brought proceedings concerning the validity of contracts affecting a Manchester development property. Those proceedings were compromised by a Tomlin order incorporating a settlement agreement. The agreement recognised the lenders’ security arrangements, released claims arising from the original proceedings, and imposed obligations following default.

A payment default occurred. The lenders applied to lift the stay and require the claimant to take steps to remove unilateral notices from the Land Registry title. The claimant sought an adjournment pending proposed proceedings challenging provisions of the settlement agreement as unlawful penalties. The central issues were whether that challenge could be considered within the enforcement application, whether the claimant had standing to advance it, and whether any arguable penalty affected the obligation to remove the notices.

1. The application was granted. The stay imposed by the Tomlin order was lifted, and the claimant was ordered to comply with clause 5.2.5 of the settlement agreement by taking the necessary steps to remove the unilateral notices.
2. The court could consider the claimant’s arguable penalty challenge within the lenders’ enforcement application. Separate proceedings were unnecessary. The court proceeded on the footing that the relevant provisions might be unlawful penalties under Cavendish Square Holding BV v Talal El Makdessi and ParkingEye Ltd v Beavis, [2015] UKSC 67; [2016] AC 1172.
3. The claimant was barred by the settlement’s release, agreement not to sue, and related provisions from relying on his alleged ultimate beneficial ownership of the shares in Whiteacres to challenge the settlement. That assertion formed an essential part of the original claim and had been bargained away.
4. Even if the increase in the debt and the extinction of the equity of redemption were penal and unenforceable, that would not affect the lenders’ ability, following the acknowledged default, to enforce the separate contractual obligation to remove the unilateral notices. The obligation was necessary to enable realisation of the security.
5. Concerns about money laundering did not justify non-compliance. The claimant failed in resisting the application and was ordered to pay costs. The costs were summarily assessed on the standard basis at £17,229.50 plus VAT if applicable. Indemnity costs were refused because the defence was not outside the norm, and the settlement indemnity did not apply to this enforcement application.

not stated in the judgment.